- The Fundametrics® Small Cap Value strategy returned -0.62% for the quarter ending March 31st, lagging the Russell 2000 Value’s -0.13% by 49 bps.
- The biggest driver of relative weakness was the “cap effect”—i.e., the larger of the small caps generated the best returns vs. our equally weighted portfolio. The cap effect was a -80 bps drag on relative returns. As an aside, we believe investor preference for passive strategies exacerbated this dynamic, across all capitalizations including small.
- Our factor models themselves offered only marginal benefits. The Alpha Composite was mixed (Sells did the best, but at least the Buys beat the Holds) while the Financial Warnings Risk Overlay offered a slight benefit of 20-30 bps.
- More broadly, we saw significant reversals in factor leadership vs. last quarter. Value faded as Growth surged. In fact, companies with the least attractive valuations performed the best.
- Winners in 4Q, energy and bank, surrendered to health care and tech stocks in 1Q. Based on our Financial Warnings Overlay, we see above average risk to the winners of 1Q.
For the full report, please contact Derek Tubbs at email@example.com
Past performance is no guarantee of future results, and all investments are subject to risk of loss.
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Fundametrics® Research Process
The Fundametrics® research process is our proprietary computer-based research system, which screens our universe of stocks and decile ranks them according to specific valuation criteria.